ZIP: 1015 Title: Block Reward Allocation for Non-Direct Development Funding Owners: Jason McGee <aquietinvestor@gmail.com> @Peacemonger (Zcash Forum) Kris Nuttycombe <kris@nutty.land> Credits: @GGuy (Zcash Forum) Daira-Emma Hopwood Jack Grigg Skylar Saveland Status: Proposed Category: Consensus Created: 2024-08-26 License: MIT Pull-Request: <https://github.com/zcash/zips/pull/881>
The key words "MUST", "SHALL", "MUST NOT", "SHOULD", and "MAY" in this document are to be interpreted as described in BCP 14 1 when, and only when, they appear in all capitals.
"Zcash Community Advisory Panel", also called "ZCAP", refers to the panel of community members assembled by the Zcash Foundation and described at 5.
"Zcash Community Grants", also called "ZCG", refers to the committee selected by the Zcash Community Advisory Panel or a successor process (e.g. as established by FPF) to decide on the funding of grants intended to fund the Zcash ecosystem.
"Financial Privacy Foundation", also called "FPF", refers to the Cayman Islands-incorporated non-profit foundation company limited by guarantee of that name.
"Autonomous Entities" refers to committees, DAOs, teams or other groups to which FPF provides operations, administrative, and financial management support.
This ZIP proposes the allocation of a percentage of the Zcash block subsidy, post-November 2024 halving, split between Zcash Community Grants (ZCG) and an in-protocol "lockbox." The "lockbox" is a separate pool of issued funds tracked by the protocol, as described in ZIP 2001: Lockbox Funding Streams 4. No disbursement mechanism is currently defined for this "lockbox"; the Zcash community will need to decide upon and specify a suitable decentralized mechanism for permitting withdrawals from this lockbox in a future ZIP in order to make these funds available for funding grants to ecosystem participants.
The proposed lockbox addresses significant issues observed with ZIP 1014 3, such as regulatory risks, inefficiencies due to funding of organizations instead of projects, and centralization. While the exact disbursement mechanism for the lockbox funds is yet to be determined and will be addressed in a future ZIP, the goal is to employ a decentralized mechanism that ensures community involvement and efficient, project-specific funding. This approach is intended to potentially improve regulatory compliance, reduce inefficiencies, and enhance the decentralization of Zcash's funding structure.
Starting at Zcash's second halving in November 2024, under pre-existing consensus rules 100% of the block subsidies would be allocated to miners, and no further funds would be automatically allocated to any other entities. Consequently, unless the community takes action to approve new block-reward-based funding, existing teams dedicated to development or outreach or furthering charitable, educational, or scientific purposes would likely need to seek other sources of funding; failure to obtain such funding would likely impair their ability to continue serving the Zcash ecosystem. Setting aside a portion of the block subsidy to fund development will help ensure that both existing teams and new contributors can obtain funding in the future.
It is important to balance the incentives for securing the consensus protocol through mining with funding crucial charitable, educational, and scientific activities like research, development, and outreach. Additionally, there is a need to continue to promote decentralization and the growth of independent development teams.
For these reasons, the Zcash Community wishes to establish a new Zcash Development Fund after the second halving in November 2024, with the intent to put in place a more decentralized mechanism for allocation of development funds. The alternatives presented here are intended to address the following:
By addressing these issues, this proposal aims to ensure sustainable, efficient, and decentralized funding for essential activities within the Zcash ecosystem.
The following considerations are explicitly deferred to future ZIPs and are not covered by this proposal:
The "lockbox" is a pool of issued funds tracked by the protocol, as described in ZIP 2001: Lockbox Funding Streams 4. No disbursement mechanism is currently defined for this "lockbox"; the Zcash community will need to decide upon and specify a suitable decentralized mechanism for permitting withdrawals from this lockbox in a future ZIP in order to make these funds available for funding grants to ecosystem participants.
The stream allocated to Zcash Community Grants (ZCG) is intended to fund independent teams entering the Zcash ecosystem, to perform major ongoing development (or other work) for the public good of the Zcash ecosystem, to the extent that such teams are available and effective. The ZCG Committee is given the discretion to allocate funds not only to major grants, but also to a diverse range of projects that advance the usability, security, privacy, and adoption of Zcash, including community programs, dedicated resources, and other projects of varying sizes.
The funds SHALL be received and administered by the Financial Privacy Foundation (FPF). FPF MUST disburse them for grants and expenses reasonably related to the administration of the ZCG program, but subject to the following additional constraints:
FPF SHALL be contractually required to recognize the ZCG slice of the Dev Fund as a Restricted Fund donation under the above constraints (suitably formalized), and keep separate accounting of its balance and usage under its Transparency and Accountability obligations defined below.
ZCG SHALL strive to define target metrics and key performance indicators, and the ZCG Committee SHOULD utilize these in its funding decisions.
FPF SHALL conduct periodic reviews of the organizational structure, performance, and effectiveness of the ZCG program and committee, taking into consideration the input and recommendations of the ZCG Committee. As part of these periodic reviews, FPF MUST commit to exploring the possibility of transitioning ZCG into an independent organization if it is economically viable and it aligns with the interests of the Zcash ecosystem and prevailing community sentiment.
In any transition toward independence, priority SHALL be given to maintaining or enhancing the decentralization of the Zcash ecosystem. The newly formed independent organization MUST ensure that decision-making processes remain community-driven, transparent, and responsive to the evolving needs of the Zcash community and ecosystem. In order to promote geographic decentralization, the new organization SHOULD keep its domicile outside of the United States.
FPF MUST accept the following obligations in this section on behalf of ZCG:
BP, ECC, ZF, FPF, ZCG and grant recipients MUST promptly disclose any security or privacy risks that may affect users of Zcash (by responsible disclosure under confidence to the pertinent developers, where applicable).
All substantial software whose development was funded by the Dev Fund SHOULD be released under an Open Source license (as defined by the Open Source Initiative 2), preferably the MIT license.
FPF MUST contractually commit to fulfill these obligations on behalf of ZCG, and the prescribed use of funds, such that substantial violation, not promptly remedied, will result in a modified version of Zcash node software that removes ZCG’s Dev Fund slice and allocates it to the Deferred Dev Fund lockbox.
As of the activation of this ZIP, the complete set of funding streams for Mainnet will be:
Stream | Numerator | Denominator | Start height | End height |
---|---|---|---|---|
FS_FPF_ZCG |
8 | 100 | 2726400 | 3146400 |
FS_DEFERRED |
12 | 100 | 2726400 | 3146400 |
The set of funding streams for Testnet will be:
Stream | Numerator | Denominator | Start height | End height |
---|---|---|---|---|
FS_FPF_ZCG |
8 | 100 | 2976000 | 3396000 |
FS_DEFERRED |
12 | 100 | 2976000 | 3396000 |
1 | Information on BCP 14 — "RFC 2119: Key words for use in RFCs to Indicate Requirement Levels" and "RFC 8174: Ambiguity of Uppercase vs Lowercase in RFC 2119 Key Words" |
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2 | The Open Source Definition |
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3 | ZIP 1014: Dev Fund Proposal and Governance |
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4 | ZIP 2001: Lockbox Funding Streams |
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5 | Zcash Community Advisory Panel |
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